If people say China's stock market doesn't matter, show them these 2 charts

China, like Australia, is presently undergoing an epic economic
transformation. Gone are the days that infrastructure, industry,
and trade powered its phenomenal economic growth rate.

Now it's all about consumption and services, the blueprint seen
in many nations that transitioned from being developing to
developed in the decades before them.

The chart below, supplied by the NAB, reveals the composition of
China's economic growth as seen over the past 15 years, breaking
it down into primary, secondary, and tertiary industries.

Business Insider Australia

Secondary industries, encompassing the traditional drivers of
economic activity such as manufacturing and construction, is
clearly slowing, replaced by tertiary industries such as
services, retailing, and real estate.

The NAB noted that secondary industries contributed just 2.5
percentage points to Chinese GDP during the September quarter,
the smallest contribution to overall growth seen since the global
financial crisis. Tertiary industries, on the other hand,
blossomed, contributing a whopping 4 percentage points, around
58% of all economic growth registered over the quarter.

While a clear sign that China's economic transition is gathering
speed, when the tertiary growth figure is broken down into
individual components, it raises questions over whether the
acceleration in services growth can continue in the years ahead.

Business Insider Australia

Although down on the near 35% contribution to services growth
seen over the June quarter, largely on the back of the nation's
booming stock market, financial services still contributed 28% to
services growth in the most recent GDP data, overshadowing
contributions from wholesale and retail trade along with
real-estate services.

Even with a near 50% correction in the nation's stock market that
occurred during the quarter, it provided the vast majority of
growth in the sector.

As it has done over the past year, financial services will be
relied upon to be a growth engine for China's economy in the
decades ahead, as household wealth increases and the nation's
financial markets mature.

While many have been quick to point out that direct household
exposure to stocks is low in China compared to other nations —
something that to some suggests sharp market movements in either
direction will have little bearing on overall levels of economic
growth — given the evidence of recent GDP data, that's clearly
not the case.

With secondary industries slowing fast and the outlook for the
property market subdued, the stock market, more than ever,
remains a key cog in determining the outlook for Chinese growth.